Information Meeting For Financial Results For the Second Quarter of FY2010. August 3, 2010 Future Architect, Inc.

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August 3, 2010

Future Architect, Inc.

Information Meeting For Financial

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-Meeting Agenda

1. Overview of Earnings for the First Half of

FY2010

2. Summary of the First Half of FY2010

3. Earnings Outlook for FY 2010

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1. Overview of Earnings for the

First Half of FY2010

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-1.

1.

Earnings were close to the level of the initial plan,

although both net sales and profits decreased from the

corresponding period of the previous fiscal year on

consolidated and non

-

consolidated bases.

– Consolidated Net sales: ¥10,938 million, Operating income: ¥1,080 million – Non-consolidated Net sales: ¥6,941 million, Operating income: ¥1,127 million

2.

Non

-

consolidated net sales and operating income were

nearly in line with the plan, although they slightly fell

short of earlier announced projections, due to steady

progress of major projects and successful acquisition

of new customers.

3.

Earnings of Ascendia Inc. were relatively steady and

loss of Uoei Shoten Corporation was small. As a result,

consolidated operating income and ordinary income

were as projected.

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Consolidated Results for the First Half of FY2010

(Millions of yen) FY2009 results

for the first half

FY2010 plan for the first half

FY2010 results for the first half

Year-on-year change

lower line: compared with the plans

Net sales

12,984

11,250

10,938

(15.8%)

(2.8%)

Operating

income

Operating income margin

1,640

12.6%

1,075

9.6%

1,080

9.9%

(34.2%)

+0.5%

Ordinary

income

Ordinary income margin

1,707

13.2%

1,095

9.7%

1,147

10.5%

(32.8%)

+4.8%

Net income

Net income margin

950

7.3%

600

5.3%

529

4.8%

(44.3%)

(11.8%)

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-Consolidated Results by Segment for the First Half of FY2010

Package & Service Business (Millions of Yen)

(Millions of Yen) ResultsResults Net sales

Net sales 1,8941,894 Operating income

Operating income ((65)65)

Corporate Revitalization Business New Business Cultivation Business

(Millions of Yen)

(Millions of Yen) ResultsResults Net sales Net sales 2,2992,299 Operating income Operating income (10)(10) IT Consulting Business (Millions of Yen)

(Millions of Yen) ResultsResults Net sales

Net sales 6,8656,865 Operating income

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Consolidated Balance Sheets (1/2)

(Millions of Yen) End of Jun. 2009

End of Dec. 2009

End of Jun. 2010

Change from the end of Dec. 2009

Current assets 9,363 8,140 8,915 774

Cash and cash

equivalents 2,995 3,785 3,958 172

Notes and accounts

receivable 5,406 2,301 2,735 434

Other 961 2,053 2,221 167

Fixed assets 4,086 4,416 3,974 (442)

Tangible fixed assets 1,138 884 844 (39) Intangible fixed assets 539 533 452 (81) Software 441 439 409 (30) Other 98 94 43 (50) Investments and other assets 2,408 2,998 2,677 (321) Investment securities 1,395 1,883 1,815 (67) Other 1,012 1,115 861 (253) Total assets 13,450 12,557 12,889 332

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-Consolidated Balance Sheets (2/2)

(Millions of Yen) End of Jun. 2009

End of Dec. 2009

End of Jun. 2010

Change from the end of Dec. 2009

Currents liabilities 4,268 2,449 2,944 494

Accounts payable 748 591 518 (73)

Short-term borrowings 1,262 62 562 500

Income tax payable, etc. 797 365 457 92

Other 1,460 1,431 1,406 (24) Non-current liabilities 272 265 306 40 Long-term borrowings 64 48 32 (16) Negative goodwill 64 102 77 (24) Other 144 115 196 81 Total liabilities 4,540 2,715 3,251 535

Total net assets 8,909 9,841 9,638 (203)

Common stock 1,421 1,421 1,421 ⎯

Treasury stock (2,342) (1,171) (1,171) ⎯

Net unrealized gain on available-for-sale securities

161 62 63 1

Other 9,668 9,529 9,325 (204)

Total liability and assets

Shareholders’ equity ratio

13,450 66% 12,557 78% 12,889 74% 332 ⎯

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Consolidated Cash Flow

(Millions of Yen) First half of FY2009 First half of FY2010 Change from a year earlier Cash flows from operating

activities 580 339 (240)

Cash flows from investing

activities 25 248 222

Cash flows from financing

activities (434) (243) 191

Effect of exchange rate change on

cash and cash equivalents 10 (2) (12)

Change in Cash and cash

equivalents 182 342 160

Cash and cash equivalents at

beginning of the period 2,612 3,585 972

Cash and cash equivalents at

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Copyright ©2010 by Future Architect, Inc. Japan

2. Summary of the First Half of

FY2010

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Industry trends

A trend of decrease in sales of the information service business

A trend of decrease in sales of the information service business continues.continues.

⇒

⇒ According to the Current Survey of Selected Service Industries bAccording to the Current Survey of Selected Service Industries by the Ministry of Economy, y the Ministry of Economy, Trade and Industry (confirmed in May), sales decreased from a ye

Trade and Industry (confirmed in May), sales decreased from a year earlier for the twelfth ar earlier for the twelfth straight month after May 2009.

straight month after May 2009.

According to the Bank of Japan

According to the Bank of Japan’’s Shorts Short--term Economic Survey of Enterprises in term Economic Survey of Enterprises in Japan (Tankan), the amount of corporate investment in software (

Japan (Tankan), the amount of corporate investment in software (plan for FY2010) plan for FY2010) turned into an increase from a year earlier.

turned into an increase from a year earlier.

⇒

⇒ However, judging from the financial information of our competitoHowever, judging from the financial information of our competitors, this increase is likely to materialize in rs, this increase is likely to materialize in

the form of actual orders received after the second half of FY20

the form of actual orders received after the second half of FY2010.10.

The business condition judgment shows a trend of improvement.

⇒

⇒ However, the numeric figures of the business condition judgment However, the numeric figures of the business condition judgment remain negative. Particularly, remain negative. Particularly, improvement tends to be slow in small and medium

improvement tends to be slow in small and medium--sized companies.sized companies.

Generally, major projects progress steadily. The decrease in net

Generally, major projects progress steadily. The decrease in net sales for the first sales for the first half is within the predictable range.

half is within the predictable range.

The Group continuously enjoys the effects of optimizing costs in

The Group continuously enjoys the effects of optimizing costs including cluding subcontract expenses. In addition, employees

subcontract expenses. In addition, employees’’utilization rate has been improved utilization rate has been improved since the second half of FY2009.

since the second half of FY2009.

Orders received in the IT consulting business are on an upswing.

Orders received in the IT consulting business are on an upswing. The pace of The pace of recovery of the business targeted at small and medium

recovery of the business targeted at small and medium--sized companies sized companies (Package & Service Business) remains moderate.

(Package & Service Business) remains moderate.

The Group

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Copyright ©2010 by Future Architect, Inc. Japan

IT Consulting Business

Future Architect, Inc Future Financial Strategy Corp ABM

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Main Results for the First Half of FY2010

(IT Consulting Business) (Millions of Yen)

(Millions of Yen) First half ofFirst half of FY200 FY20099 First half of First half of FY20 FY201010 Net sales Net sales 8,4708,470 6,8656,865 Operating Operating income income 1,6021,602 1,1431,143 Future Architect Future Architect

Consulting busines for financial copanies (FFS and ABM)

9 Orders received are on an upswing. The Company acquired several new projects during the first half of FY2010.

9 They are expected to expand to the level of hundreds of millions of yen after the second half of FY2010.

9 As net sales decreased, the utilization rate dropped for the first quarter (recovered as of the end of the second quarter).

9 Continued reluctance of financial institutions to make investments

9 Accompanying this, projects that would be scheduled to start in the second quarter were postponed across the board.

• Both net sales and operating income were almost as planned.

• The primary contribution is the effects of reducing subcontract expenses and selling, general and administrative expenses.

• Growth of existing projects and expansion of new projects are expected for the second half.

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Non-consolidated Analysis of Sales from IT Consulting Business (1/2)

-Trends in sales by Industry

- 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 百万円 10上期 09下期 09上期サービス流通金融その他 4 2 .2 % 3 1 .7 % 2 2 .1 % 4 2 .0 % 3 6 .2 % 2 0 .6 % 4 7 .4 % _{2 6 .4 %} _{1 7 .0 %} _{9 .2 %} 6 .0 % 1 .2 % First half of 2009 Second half of 2009 First half of 2010 Millions of yen

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Trends in sales by phase

Non-consolidated Analysis of Sales from IT Consulting Business (2/2)

- 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 百万円 10上期 09下期 09上期グランドデザイン設計開発保守運用他 12.5% 1 9.4% 60 .7 % 7 .4% 1 2 .7 % 3 1 .0% 38 .3 % 1 8 .0 % 16.7% 34.0% 34.8% 14.5% First half of 2009 Second half of 2009 First half of 2010 Millions of yen

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Copyright ©2010 by Future Architect, Inc. Japan

Package & Service Business

Future Architect, Inc. SBD Ascendia Inc. Elm Corporation

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Tool & ERP business for midsize copanies (Future Architect, Inc. SBD, Former MBS Unit)

Business solution for midsize copanies and SMEs (Elm Corporation)

9 Having bottomed out in the second half of FY2009, the number of business meetings shows a slight sign of recovery (entered the black in the second quarter).

9 Renewed the business to strengthen existing products and enhance cloud-type services.

9 Owing to the measures for increasing inquiries implemented in FY2009, the number of business meetings increased.

9 Secured a new market even under the tough business conditions.

Outsourced development, Regional Business (Ascendia Inc.)

Outsourced development, Regional Business (Ascendia Inc.)

9 As a result of a recovery in willingness to make corporate investments, outsourcing businesses performed well and orders for new public projects were received.

9 Reinforcement and development of the operation service sector (continued)

Main Results for the First Half of FY2010

(Package & Service Business) (Millions of Yen)

(Millions of Yen) First halfFirst half

of FY200 of FY20099 First half First half of FY20 of FY201010 Net sales Net sales 2,3622,362 1,8941,894 Operating income Operating income 9797 ((65)65)

• Recovery of client investments was moderate • Preparation for developing a new core market • Preparation for offering cloud-type services

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Corporate Revitalization Business /

New Business Cultivation Business

Uoei Shoten Corporation

Zakura Inc.

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Further improvement in the rate of profit

Fostering the business to be a community-based firm

9 Additional establishment of after-school children center (hokago jido club) 9 Sales of PB products from Niigata Prefecture

9 In addition to continuously reviewing the number of items and markup,

strengthen the cooperation between the Deli Division, whose rate of profit is high and the Fresh Fish and Meat Divisions (cross-selling).

Considering enhancing IT systems

Considering enhancing IT systems

9 Preparation for expanding the target of automatic ordering system 9 Preparation for implementing distribution BMS (new EDI system)

Main Results for the First Half of FY2010

(Corporation Revitalization Business/New Business Cultivation Business) (Millions of Yen)

(Millions of Yen) First halfFirst half

of FY200 of FY20099 First half First half of FY20 of FY201010 Net sales Net sales 2,318_2,318 2,2992,299 Operating Operating income income ((36)36) (10)(10)

• Almost reached the level of well-balanced revenue and expenditure

• Fostering the business to be a community-based firm

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Earnings Outlook for FY2010 (1/2)

IT Consulting Business

Status of major projects

z The two major projects are progressing steadily.

z Progress of capital alliance with the SGH Group: New business under discussion through the alliance (a part thereof has already started

Status of orders received

z Three to four new projects (the service industry, the distribution industries) are expected to expand to the level of hundreds of millions of yen.

z In addition to the above-mentioned projects, the Company is expecting to acquire several projects that have been approaching since the previous year.

Status of resources

z As the scale of projects expands and the number of projects increases, the utilization rate will further rise.

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-Earnings Outlook for FY2010 (2/2)

Package & Service Business

Package & Service Business

Corporate Revitalization/New Business Cultivation Business

Improving competitiveness through enhancing products Reinforcing necessary functions to further unearth target markets

Developing a solution for a new industry (the manufacturing industry)

Responding to provision of cloud-type services

Complete preparing for providing cloud-type services for an accounting system (starting as early as autumn 2010)

Currently preparing to provide cloud-type services for ERP packages

Reinforce selling skills through store renovation (small-scale renovation)

Commence renovation of the Kameda Store which has the oldest building

Given that renovated small-scale stores are steadily maintained, the management know-how of these stores will be disseminated in a cross-divisional manner. In

addition, back rooms will be renovated toward improving productivity and enhancing cross-sold products.

Enhance operating efficiency through promoting IT strategy Expand subject items (daily articles and beer) for automatic ordering systems

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Consolidated Earnings Outlook for FY2010

(Millions of Yen)

FY2009

Results

FY2010

Plan

Year-on-year

change

Net sales

23,658

24,000

+1.4%

Operating income

Operating income margin

2,618

11.1%

3,000

12.5%

+14.6%

Ordinary income

Ordinary income margin

2,704

11.4%

3,040

12.7%

+12.4%

Net income

Net income margin

1,204

5.1%

1,550

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Advantages and Disadvantages in Implementing the Cloud Technology

z

Merits?

This architecture enables you to use a single computer as if it were split into two or more computers. Conversely, you can also use multiple

computers distributed (on the Internet) as if they were a single computer. This is owing to the advancement of technologies including

parallelization, load distribution and virtualization as well as high-speed internet (i.e., using the cloud is cheaper than having your own hardware and software, etc.)

It allows you to start an operation speedily by utilizing IT resources that are already prepared (higher speed).

It enables you to distribute and level out loads on the system.

This technology itself has already been commercialized by some world-leading companies.

z

Demerits?

This architecture increases the possibility of vendor lock-in.

Many “authorization-based technologies” including comprehensive outsourcing, ASP and SaaS came on the market in the past. However, quite a few companies ended up not using them.

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-History of Development of Computer Systems and Technologies

IBM’s innovation

Mainframe

Source “Computer Museum” of Information Processing Society of Japan To use this material appropriate procedures based on copyright must be followed.

Card puncher

and reader

(input device)

Large-capacity

magnetic storage system

Line printer

(output device)

Can be compatible

with superior

models

•

Outstanding convenience

It eliminated the need for making troublesome operations such as

connecting and synchronizing system configuration devices (like current

plug-and-play).

Even when upgrading systems, it ensured compatibility with superior

models owing to companies’ growth and an increase in the volume of

data (no need to rebuild the system).

•

As a result,

Advancement of systematization

IBM had about 50% of the sales and most of the profits in the global

computer industry.

Quite a few users of outsourcing, ASP and

SaaS were locked-in in similar cases.

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The cloud is not just a trend but a normal revolution in line with

technological innovation.

z The advantages in light of cost reduction and speed of system configuration are not small.

Caution must be used regarding this point: the cloud is not a panacea.

z Possibility of vendor lock-in

z When and how we will use it, instead of whether or not we will use it

•

In order to divide the operations into core operations and general

operations and to appropriately handle a system that should remain in

the in-house function and a system that can be extended to the outside,

correct understanding of technological elements

and

clear strategy

on the cloud

are necessary.

•

We may not benefit from the real effects of the cloud if we only count on

an IT vendor. It is thus important to

exert control over the architecture

with clear intent.

That Is:

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-Fully-neutral IT consulting company

z Future Architect is capable of selecting optimal technologies and cloud services for each client and providing it with support for use from the standpoint of an outside CIO and technology expert.

z We are not promoting enhancement of the cloud with the intent of having our clients use our own iDC and applications. (With one false move, use of the cloud could cause a new lock-in.)

A number of previous achievements with the cloud technology

z We previously constructed a main system with a private cloud that was cutting edge in Japan for Sagawa Express (received the Oracle Grid Award 2007).

z We have a series of operating applications that can support cloud services even for small and medium-sized companies.

z The Group realized full SaaS computing of operating software ahead of any other in Japan. (These technologies have been incorporated into those

receiving the award of Software Products of the Year.)

z We started considering support for the cloud for other applications.

Consideration of alliance with the SGH Group in case

infrastructure needs to be provided

z Use of data center of the SGH Group

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OS OS Development Development framework framework

We realize high-quality, high-speed, expandable systems by minimizing the parts that the client is required to uniquely develop through enhancing the commonality of

clients’ system infrastructure.

We make good use of cloud architecture with high affinity to ensure greater flexibility. Conventional individual system Hybrid system proposed by Future

Common framework

Common framework

Client

Client’’s operating applications operating application

ＶＭ

ＶＭ++ＯＳＯＳ

Service under the common base

OS OS ＰａｓｓＰａｓｓＨａａｓ・ＩａａｓＨａａｓ・ＩａａｓＨａａｓ・ＩａａｓＨａａｓ・ＩａａｓＳａｓｓＳａｓｓ Vendor B Vendor B ・・・

System Architecture that Can be Offered by Future

Construction of private cloud Use of public cloud

Purchase

Purchase _Production_Production Accounti

n g Accounti n g Human re source s Human re source s Ma rk eting Ma rk eting Unique OS Unique OS Vendor A Vendor A

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-Future’s Cloud Strategy (Conclusion)

We will start offering consulting services based on the cloud

strategy: Diagnosis of client’s current system → Proposal of strategy

on using cloud (→ system construction based on the result of

diagnosis and strategy)

We will construct a main system for the core operations of our clients by utilizing the greatest technological combination of cloud and on-premises from a standpoint that is neutral to technology, products and services.

z Achievement of state-of-the-art private cloud z Use of public cloud for HaaS and IaaS

We will actively enhance support for the cloud to our own solution for small and medium-sized companies.

z Further evolution of SaaS accounting

z Offering cloud-type services for sales management and Lisner+

Alliance with the SGH Group for use of infrastructure

z SGH data center

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-Non-Consolidated Results for the First Half of FY2010

(Millions of Yen) FY2009 results for the first half FY2009 plan for the

first half FY2010 results for the first half Year-on-year change

lower line: compared with the plans

Net sales

8,654

7,300

6,941

(19.8%)

(4.9%)

Operating income

Operating income margin

1,640

19.0%

1,150

15.8%

1,127

16.2%

(31.3%)

(2.0%)

Ordinary income

Ordinary income margin

1,679

19.4%

1,170

16.0%

1,172

16.9%

(30.2%)

+0.2%

Net income

Net income margin

1,008

11.7%

650

8.9%

668

9.6%

(33.7%)

+2.9%

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First half of FY2009 First half of FY2010 Y-o-Y ratio Selling, general and

administrative expenses 1,521 1,914 125.8% Personnel expenses 740 1,014 137.0%

Strategic expenses 271 167 61.6%

R&D expenditures 11 20 181.8%

Depreciation expenses 108 23 21.3%

Employee training expenses 126 93 73.8%

Recruiting expenses 25 30 120.0%

z

z Changes in selling, general and Changes in selling, general and administrative

administrative (Millions of Yen) First half of FY2009 First half of FY2010 Y-o-Y ratio IT consulting service 5,087 3,204 63.0% Labor expenses 2,284 1,968 86.2% Outsourcing expenses 1,790 698 39.0% Others 1,011 537 53.1%

Cost of sales of HW procurement 203 578 284.7%

Cost of sales of Package & Service 201 115 57.2%

Total 5,492 3,899 71.0%

z

z Changes in cost of salesChanges in cost of sales _{(Millions of Yen)}

First half of FY2009 First half of FY2010 Y-o-Y ratio Net sales 8,654 6,941 80.2% IT consulting 8,049 6,029 74.9% HW Procurement 239 709 296.7%

Package & Service 365 202 55.3%

z

z Increase (decrease) in net salesIncrease (decrease) in net sales _{(Millions of Yen)}

Financial Topics (non-consolidated)

●

●Shareholder compositionShareholder composition

個人その他, 74% 金融機関 9% 外国人 4% 一般 13% First half of FY2009 First half of FY2010 Y-o-Y ratio Net sales 8,654 6,941 80.2% Cost of sales 203 578 284.7% Outsourcing expenses 1,790 410 22.9%

Balance: value added* 6,661 5,953 111.9%

Average number of consultants 675 707 104.7%

Average sales per consultant 12.8 9.8 76.6%

Average value added per

consultant 9.9 8.4 85.3%

z

z EmployeesEmployees’’average age and average average age and average length of service

length of service (Millions of Yen)

Individuals, other 74% General 13% Overseas shareholders 4% _Financial institutions 9% *Value added = Net sales

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-Note

Note

The forecasts in this material are based on currently

available information, and actual results may differ from

such forecasts depending on the future direction of the

Japanese economy and the IT service industry.

It should be noted that the Company does not guarantee

or promise the accuracy of these forecasts.

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